GTHT has released a research report stating that the luxury goods industry overall entered a normalized phase of stock game competition in 2025, with significant divergence in profitability realization among brands such as Tapestry and Hermès. During Q4 2025 and the subsequent Spring Festival period, the performance of many brands in the Greater China region improved sequentially. Management of related companies largely attributed this improvement to the appreciation of the Japanese Yen, which led to the repatriation of some overseas tourism consumption to the Chinese domestic market, coupled with proactive marketing efforts by the brands. On the other hand, in North America, performance for most brands slowed sequentially in Q4 2025 compared to Q3, due to a high base effect, though the two-year compound growth rates for Q4 and Q3 were compared. Looking ahead to 2026, the report suggests that price increase magnitudes in the luxury sector will tighten, and it advises monitoring market reactions stemming from a concentrated wave of creative director changes at major brands. The main viewpoints from GTHT are as follows:
In 2025, the luxury goods industry overall entered a normalized stage of stock game competition. Prada noted during its earnings call that the industry has lost approximately 20% of its consumers over the past few years, with performance diverging significantly among brands: 1) Coach delivered robust 25% revenue growth in Q4 2025 at constant exchange rates, with its operating margin expanding significantly by 3.9 percentage points. Miu Miu achieved high retail sales growth of 35% for full-year 2025, though Q4 growth slowed to 20% due to a high base of 84% in Q4 2024, indicating a normalization of its growth trajectory. 2) Hermès, leveraging strong loyalty from high-net-worth clients and its vertical supply chain, achieved 8.9% revenue growth for the full year at constant exchange rates, demonstrating exceptional stability across all four quarters. 3) Brands in transition showed marginal improvement in Q4 2025; Burberry achieved 3% growth in same-store sales for Q4, while Gucci's revenue decline narrowed to -10% from -14% in Q3.
Profitability realization varied markedly among companies. Tapestry led in margin expansion due to rising average transaction values and effective operating leverage. Hermès saw its operating margin expand against the trend to 41%, supported by its strong pricing power and vertical supply chain. Conversely, Kering experienced a 3.4 percentage point year-on-year decline in its full-year operating margin, primarily due to ongoing challenges at Gucci leading to negative operating leverage. Canada Goose also faced significant margin pressure in Q4 2025 as expense growth exceeded expectations. It is also noteworthy that companies reporting in Euros were significantly impacted by negative currency effects in Q4 2025. LVMH explicitly stated that exchange rate fluctuations negatively impacted its full-year recurring operating profit; its Q4 revenue declined by 5%, while organic revenue grew by 1%, indicating a currency headwind of approximately 6% to reported revenue for the quarter. Prada also faced a 3.8% full-year currency impact, and Hermès estimated a negative currency impact of approximately €500 million for the full year.
Performance in the Greater China region generally improved in Q4 2025, showing resilience in North America despite high comparables. Many brands saw sequential improvement in the Greater China region during Q4 2025 and the subsequent Spring Festival period. For instance, Burberry's same-store sales in Greater China turned positive, growing by 6%, and Coach recorded significant growth of 34%. However, it is important to note that management from several companies indicated that this improvement was more attributable to the Yen's appreciation repatriating overseas spending to China and brand-led marketing initiatives, suggesting that a fundamental reversal in macroeconomic consumption trends still requires observation. Influenced by these currency and tourist flow changes, the Japanese market generally cooled in Q4 2025 due to weaker tourist spending. In North America, while sequential performance slowed for most brands in Q4 due to a high base effect compared to Q3, the two-year compound growth rates for Q4 and Q3 showed improvement for Hermès, Tapestry, Canada Goose, and Prada.
Price hike magnitudes are expected to tighten in 2026, alongside a concentrated wave of creative director changes. Hermès and Moncler are projected to implement price increases of 5-6% and 3%, respectively, in 2026. Gucci plans to adjust its pricing matrix, introducing more competitive prices to stimulate demand rather than pursuing blind price increases. LVMH will not implement across-the-board price hikes but may enact moderate increases in the US market to address potential tariffs, while its wines and spirits division will not raise prices. The year 2026 will also witness a concentrated changeover of creative directors across the luxury industry: Gucci's first full collection under new creative director Demna will launch in early 2026; Jonathan Anderson will take full responsibility for Dior's haute couture and men's/women's ready-to-wear collections; Michael Rider will assume design duties at Celine; Sarah Burton will join Givenchy; Jack McCollough and Lazaro Hernandez have been appointed at Loewe; Maria Grazia Chiuri has been named Chief Creative Officer at Fendi; and Pieter Mulier will take the role of Chief Creative Officer at Versace, with his debut collection expected in 2027, making 2026 a transitional year. The market reception of these new collections is anticipated to be a core variable reshaping the subsequent growth drivers for the related companies.
Risks include consumer willingness falling short of expectations, fluctuations in raw material prices, and intensifying industry competition.
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